Smart Money Accumulating Stocks; Trading Shares In Market Drained

Equity stock market continues to oscillate as liquidity drives market up and down. Although market participants sit on mountain of cash, there is reluctance to execute trades to buy or sell stocks. Institutional and individual investors suffer loss in last year during panic selling at the bottom and miss the rally in this year. Therefore it is preferred to wait and see if market will fall back again in a pessimistic market environment. But market gradually climbs back against wall of worry while there is always fear of sudden market collapse again. As a result investors remain cautious and find safety in money market or treasuries and bonds. On the other hand, knowing that market valuation is attractive, investors are not going to dump stocks during sell-off period and see that the core portfolio value rises along with market trend.

Economic activities create wealth and individuals are looking for wealth assets. Majority of people find safe haven in treasuries and bonds. However, smart money looking for opportunity in equity stocks is also growing. A few weeks ago, it is already observed that hot money are finding bargains in equity stocks despite market participants screaming for market collapse. During this consolidation period, investors are fear of panic selling on Euro zone debt crisis. However, market manipulators that spread the bad news are afraid to dump stocks. Seeing that selling pressure is limited, traders become very cautious of the risk of short covering rally for short stocks.

Trading activities remain low as market participants confidence stays at low level. From last year lesson of selling at bottom investors have learned not to sell at bottom. Therefore, unlike last year there is no panic sell-off in this year as market participants are holding the heavily trimmed core portfolio alongside with large amount of cash. The latter provides negligibly low return while the former appreciates in value despite a pessimistic market environment.

Fear makes investors to hold cash. Investors are averse to risk. Greed only makes investors to hold the portfolio instead of panic selling. Smart money sees the support and have already begun accumulation. The available trading shares in market decreases since long term investors and cash rich individuals and corporations are collecting shares from day traders. The frozen shares become wealth assets and may not return to the stock market in short term.

There are still a lot of uncertainties in the economy. Financial market remains turbulent in a sea of surplus capital. Actual economy is muddling through due to constrained capital liquidity because banks are extremely cautious in lending. Wealth inequality also have large impact on economic activities. Although global wealth grows steadily and surpasses the peak before the 2008 financial meltdown, average population is not benefited much. Large portion of the newly generated wealth becomes assets of the rich elites which does not enter into direct economic activity with multiplier effect. Nevertheless, assets price are buoyed by rising demand.

Equity stock market is manipulated in current environment. Speculators have ample liquidity to manipulate market movement in the desired direction. Although, pessimism dominates the market, investors are reluctant to sell. Market manipulators can no longer make profit from panic selling. Despite widespread expectation of market collapse, market recovers from bottom during panic selling in last year. Although profit taking from smart investors buying at bottom may be a drag on market, the recent inflow of capital from low return asset markets indicates increased investors risk appetite. Market participants should make use of this market cycle with bottoming in last year to strengthen the portfolio for long term appreciation. Traders and speculators can position to strengthen the portfolio on pullback and take profit when market rallies during oscillation cycles in a longer term cycle uptrend.



Roubini: My 'Perfect Storm' Is Unfolding Now
"Dr. Doom" Nouriel Roubini, says the "perfect storm" scenario he forecast for the global economy earlier this year is unfolding right now as growth slows in the U.S., Europe as well as China.

In May, Roubini predicted four elements - stalling growth in the U.S., debt troubles in Europe, a slowdown in emerging markets, particularly China, and military conflict in Iran - would come together in to create a storm for the global economy in 2013.

Roubini said that unlike in 2008 when central banks had "policy bullets" to stimulate the global economy, this time around policymakers are "running out of rabbits to pull out of the hat."

Last week, he told CNBC that there is "virtually zero chance" that pump-priming by central banks will succeed, suggesting that policymakers should instead let the economic bust work itself through the system.

Why Gold and Treasuries Are Losing Safe Haven Status
At a time when the economy is weak, earnings growth is slowing and central banks all over the world are printing money, demand for so-called safe havens is outpacing supply. Simply put, there are not a lot of good, low risk places to park money anymore, and that especially applies to U.S. treasuries.

"I don't think Treasuries are the place to be at all if you're trying to protect your buying power over the long term," says Marc Lichtenfeld, Associate Investment Director at the Oxford Club and author of the book, Get Rich With Dividends. "They are safe in that you'll very likely get your money back, but they're not safe at all in terms of buying power," he adds in the attached video.

"To me, gold is a rock" he says. "Gold is only worth what people say it's worth."

It's all part of why Lichentenfeld is "very biased towards dividends" especially those from blue chip companies like McDonald's (MCD), which has raised its payout to shareholders every year since it was initiated in 1976. And best of all, their latest pay raise, so to speak, was 15%, more than enough to offset inflation and taxes and retain buying power.

Why Economy Is Slowing: 'Things Could Get Much Worse'
Measures like lowering interest rates and creating money for central banks to conduct trillions in asset purchases are "now seen as a sign of weakness rather than strength," said Andrew Kenningham, senior global economist at Capital Economics, a London-based forecasting firm.

That view is gaining validity as easing moves last week in Europe and China as well as the recent measure from the Federal Reserve have had little effect in financial markets.

"The most intractable factor is that many borrowers in developed countries are less interest-rate sensitive than in past easing cycles due to the overhang of debt that plagues the US and many other countries," Misra said.

The U.S. fiscal cliff remains the second part of the twin global policy trap, along with the missteps in Europe.

So what can governments do?

Some think the best solution is for them to do less, not more. Allowing the cash-rich private sector to sort out its own problems without government's interference likely would be painful but could be the only sustainable path to recovery.

Stick With Stocks, Despite Growing Economic Fears: Josh Brown
The laundry list of mega-risks piling up against stocks seems to be growing more precarious by day.

Europe's nearly three-year-old debt crisis remains a train wreck. The U.S. economy teeters on another recession as job growth slows. China's economy is slowing and some pundits see a harder landing rather than a soft one. And war with Iran over its nuclear ambitions looms in the wings.

What do these headwinds spell for stocks as markets set off into the second half of the year? A whole lot of nothing, according Josh Brown of Fusion Analytics; he says there's no place he'd rather place his and his clients' money than in stocks right now.

To sum it all, he writes on his blog:

So yeah, I know how much everything sucks…. And while I have no idea where the whole market is going, I have stocks/sectors on my screen taking bad news in stride and creeping up past new year highs, decade highs and all-time highs. So I'm sticking around to see what happens next.

Biggest Danger Right Now Is Not Being Invested: Pro
Not being invested in equities right now is one of the "most dangerous" things to do, according to Jack Bouroudjian, CEO of Bull and Bear Partners, who believes U.S. companies will beat Wall Street's estimates for second-quarter earnings.

Corporate America is "richer than ever before" and consumers have more disposable cash because of recent lower oil prices, Bouroudjian told CNBC on Tuesday, adding that the extra cash will boost earnings and bode well for stocks in the next few years.

Others are also recommending investors stay defensive because of weak earnings and slowing growth. King Lip, Chief Investment Officer of Baker Avenue Asset Management, said he expects a volatile few weeks during which companies report poor second-quarter earnings. He advises investors to stay in a "risk off" mode during this time and move into defensive sectors like utilities and consumer staples.

"It seems that finally Europe's woes are showing up in earnings and China's slowdown is also showing up in earnings forecasts," Lip told CNBC Asia's"The Call". "So it appears that despite how strong balance sheets are for corporate America, generally speaking, forecasts are not bullish at all. We saw that from companies like Nike, Procter and Gamble, FedEx. We think it's going to be a tough slog for the earnings season."

Global Investors Are More Fearful Now Than 2008 Post-Lehman Era: Dempsey
By now, most Americans are aware of our record low interest rates, whether it's through a reduced mortgage payment, lower credit card charges or simply from hearing about the 10-year Treasury yielding 1.5%. What you may not know is that there are a dozen countries whose 10-year debt is yielding less than 2% right now, and that 7 of these are even lower than the U.S., including Switzerland, Japan, Hong Kong, Denmark, Germany, Sweden and Singapore.

"Around the world, the single narrative of collapse has taken hold," says Ed Dempsey, chief investment officer at Pension Partners. "Everyone is positioned for collapse."

Interestingly, the other side of this panic-like flight to quality is being matched by a panic-like flight from stocks. In fact, in a note to clients today, Stifel Nicolaus' David Lutz writes ''asset allocators at major retail firms have their equity weighting the lowest in over 15 years - well below 2009 levels which was a big mistake."

Fear and pessimism are clearly in charge and on a roll right now. The recent string of weak jobs data, talk of recession, the fiscal cliff, and slowing growth in Europe and China are all adding to investor angst.

"I'm not saying that the event can't happen or it won't happen, I'm simply saying that bond investors are positioned as if it [the cataclysmic event] has already occurred, and therein lies the opportunity," Dempsey says, painting a scenario that could see the S&P 500 finishing the year with a 30-40% gain.

While Dempsey says it is clear that we are in the midst of a slowdown, and probably headed officially for recession by the 3rd or 4th quarter, the current climate is just not that threatening.

Wealth and income inequality: Who gets left behind
Most Americans make more than their parents did, but that doesn't mean they're all moving up the economic ladder.

Some 84% of Americans have higher family incomes than their parents had at the same age, according to a new report from the Pew Economic Mobility Project. And 93% of those who grew up in the poorest fifth of the income ladder exceed their parents' family income as adults.

Pew also looked at the overall wealth distribution of the parents and their children. Over the generation, only the top two tiers saw median family wealth increase, by 27% for the wealthiest and 29% for the next level down.

The middle wealth tier, meanwhile, lost 5%.

Those at the lowest wealth rung lost a whopping 63%, dropping from a median family wealth of $7,439 in the parents' generation to $2,748 in the children's.

Getting a college degree is also a ticket to economic mobility. For those raised at the bottom of the income ladder, nearly one half of children were stuck there as adults if they didn't go to college. But only 10% of those with a college degree remained at the bottom.

One main reason that children have more family wealth than their parents is because of the increasing number of married women in the workforce. Though men's earnings gains have been slowing, women have been making up the difference.

"Mobility is more and more a family enterprise," Currier said. "Families are moving up the income and wealth ladders because of second earners."

It’s Too Expensive to Be Defensive: Dempsey
If Macy's put signs in its windows, suddenly announcing that everything was 25% off, people would be lined up in the street looking to take advantage of the deal. On Wall Street however low prices seem to be a deterrent. Right now the safest assets continue to be priced up, while riskier investments are being ignored. In short, it's become very expensive to be defensive.

And it's not just the stock market. Bond markets at home and around the world are also pushing the limits on price.

"It feels terrible. It really does. It feels really bad" says Dempsey of the current state of unease that has fueled the aversion to risk. "Investors have positioned inside the stock market for a crash that has not happened."

Even so, every trend has limits and at some point the clouds over Europe and China will subside and the appetite for risk will come back. The trick is not only being able to spot the turn, but having the conviction to buy risk assets when they're inexpensive and out of favor.

Alan Greenspan Sees 'Two Separate Economies'
There is a unique, structural imbalance in the U.S. economy, former Federal Reserve Chairman Alan Greenspan said Wednesday on CNBC.

"It may be a recession, but I'm not seeing it at the moment, and it's not relevant as far as I can see," he said in an interview on "The Kudlow Report."

"The best way I would describe it is to think in terms of two separate economies," he said. "One is probably 90, 92 percent of the GDP and is doing actually reasonably well. The other 8 percent is largely structures or more exactly, long-lived assets. The attitude of business and households against committing to long-lived assets is extraordinarily suppressed."

"I will say this, however, that the data do show that the expansion of assets has had very little impact on the economy, for an important reason, that we've created a major increase in the asset side of the Fed balance sheet and a very large trillion and a half increase in excess reserves," he said.

But, Greenspan added, there is no evidence that what were essentially deposits into the Federal Reserve Bank system were being re-loaned.

Meanwhile, the effect of nearly $1 trillion of government stimulus spending appeared counterintuitive.

Greenspan added that the data show that this "extraordinary expansion" in the deficit is crowding out private-sector investment, a result he said "shocked" him.

"But what it is, if it's not AAA corporates that are being pushed out or even probably BBB, investment grade, there is major evidence that the extraordinary rise in the deficit is pre-empting the savings that usually fund capital investment," he said. "But where it is, is it's heavily concentrated in those areas which pay high interest rates. I mean, to be sure, at 2 percent, you're not going to be stopped by anything."

Smaller businesses, Greenspan pointed out, would have to pay higher rates. And that has a broad impact.

The Rich, Very Rich, and, Now, the 'Volatile' Rich
The rich tend to be lumped together as one economic group, as if people earning $250,000 a year (or even $1 million a year) are pretty much the same as those making $50 million.

But a new analysis of top incomes tells us that there is a big difference between the super-rich and the merely rich in how they earn money.

The "fortunate 400" - or top 400 earners - make much more of their income from capital gains and other income than from salaries and wages, which account for only 9 percent of their income. Capital gains as a share of their income has also fallen, from 72 percent in 2000 to 46 percent in 2009.

What does this tell us? That those making $1 million or more are the "salaried rich," since they make more of their money from ordinary income. The super-rich make more of their money from one-time capital gains from the sale of stock or a business.